By Jagdish T. Punjabi, Chartered Accountant
[2018] 169 ITD 693 (Mumbai – Trib.)
Balkrishna P. Wadhwan vs. DCIT
ITA NO. : 5414 (MUM.) OF 2015
A.Y. : 2010-2011
Dated: 28th February, 2018
FACTS
– During relevant year,
assessee had shown income under the head long-term capital gain on sale of an
immovable property. The property sold had devolved upon the assessee after the
death of his father as a consequence of automatic dissolution of the
partnership firm, in which his father was a partner.
– The AO took a view that
since the assessee could not furnish the purchase and sale agreements of the
property in question, he was unable to verify the long term capital gain
declared by the assessee. For this reason, the AO considered the consideration
as ‘income from other sources’ and not as a long term capital gain.
– Before the CIT(A), assessee
furnished the copies of the purchase and sale agreements of the property. On
that basis, the CIT (A) concluded that the consideration was received by the
assessee on sale of an immovable property, but according to him, the same was
not a ‘capital asset’. Therefore, he disagreed with the assessee that the
profit on sale of such property was assessable under the head ‘capital gain’.
Instead, CIT (A) concluded that the profit on sale of property was assessable
as ‘business income’.
– The other three plots were
sold by the assessee in A.Y. 2008-09 and the gain arising therefrom was
declared as capital gain, and the same had also been accepted by the AO.
HELD
– The material on record
showed that during the year under consideration, the assessee had sold a plot
of land admeasuring 966.40 sq. mtrs. for a consideration of Rs. 3.75 crore. The
material led by the assessee also revealed that the plot of land sold during
the year was a part of the four plots, which admeasured in total 4648.70 sq.
mtrs.
– The Tribunal noted that the
share of assessee’s father devolved on his wife, two sons and four daughters,
and it was only by way of deed of release, that the assessee obtained complete
ownership of the plot of land from the other co-inheritors.
– It was found that neither
the assessee had declared income from any business and nor any income under the
head ‘business’ had been determined by the AO. The assessee was engaged in the
business of dealing in lands, and the sources of income detailed in the return
of income were on account of salaries, capital gain and income from other
sources.
– The basis for the CIT(A) to
treat the impugned plot of land as ‘stock-in-trade’ is the fact that the
property devolved on the assessee from the erstwhile partnership firm, where
assessee’s father was a partner. The property was acquired by the partnership
firm in 1972 and assessee’s father died in February, 1987. As per the CIT(A),
the final accounts of the erstwhile partnership firm were not available for
examination, therefore, the manner in which the impugned plot of land was
accounted for i.e. whether as capital asset or not, could not be verified.
– The CIT(A) proceeded to
presume that the land was held by the erstwhile partnership firm as a ‘business
asset for the purpose of its business’. Apparently, it is nobody’s case that
upon dissolution of the erstwhile partnership firm, its business devolved on to
the assesse.
The fact is that
only the land devolved on the assessee. So far as the assessee was concerned,
there was nothing to establish that the same had been held by him for the
purpose of his business so as to be construed as stock-in-trade. In A.Y.
2008-09, the land devolved on the assessee from his father had already been
accepted as a ‘capital asset’. Therefore, there was no justification to treat
the plot of land in question as ‘stock-in-trade’ and the assessee was justified
in treating the gain on sale of the plot to be assessable under the head
‘capital gain’.
